Last chance for Medicare, Medicaid reform? Nope

It would be easy to conclude that the supercommittee’s failure means the big, expensive health care entitlement programs — Medicare and Medicaid — are untouchable.

It also would be wrong.

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The real lesson of the supercommittee’s collapse is that the political elements have to line up just right to put the brakes on Medicare and Medicaid spending. It can be done, budget and health care analysts say.

But for the supercommittee, just about everything went wrong from the start.

The timing was off, coming too close to a presidential election. The co-chairs weren’t powerful enough. The work came too soon after a summer debt deal that Democrats hated. Republicans couldn’t give the kind of concessions on taxes that Democrats needed.

And the alternative to a supercommittee deal on health care entitlements — the 2 percent automatic cuts in health care payments and defense funding that will now take place in 2013 — wasn’t harsh enough to force a deal on Medicare and Medicaid. In fact, it might even have been the easier way out.

All of which means Medicare and Medicaid are not off the table forever. “It certainly doesn’t mean you can never, ever touch them, because we’ll have to touch them,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. With several bipartisan deficit reduction plans already circulating, she said, “if people wanted to get to yes, there’s a yes to be had.”

Here are the elements the next deficit negotiators will need to have better outcomes:

Better timing. It was always going to be a stretch to get a deal on entitlements heading into a presidential election. Supercommittee Democrats did offer Medicare and Medicaid cuts. At one point, they suggested $350 billion in Medicare savings and $50 billion in Medicaid cuts. But they couldn’t risk accepting structural changes to the programs — and Republicans couldn’t offer the kinds of tax increases Democrats would have needed to convince their voters that the deal was worth making.

“Timing does matter. The two parties have to exhaust what political gain they expect to get in the taxes and entitlement fights before a deal can happen,” said David Kendall, a senior fellow at Third Way, a centrist Democratic think tank.

The trouble all along, according to Gail Wilensky, who ran Medicare and Medicaid under the first President George Bush, was that “there are fundamentally different views on the appropriate next steps — are we spending too much or taxing too little? Having this debate in the year leading up to what is likely to be a contested election was a recipe for a stalemate.”

But that doesn’t rule out a deal right after the presidential election, just as President Bill Clinton and congressional Republicans compromised on a big deficit reduction package — including Medicare and Medicaid savings — in 1997 after fighting it out on the campaign trail.

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CORRECTION: Corrected by: Emily Howell @ 11/22/2011 10:54 AM
CORRECTION: A previous version of this story misstated the party affiliations of House Ways and Means Committee Chairman Dave Camp and House Energy and Commerce Committee Chairman Fred Upton. They are Republicans.